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ABSTRACT
This article explains how the outbreak of the First World War resulted in the de facto dissolution of the Scandinavian Currency Union. Up until the First World War, the union among the central banks of Denmark, Norway and Sweden is considered to be a success. However, the outbreak of war brought cooperation to its knees. The article rejects two conventional perspectives on the break-up of the union. Firstly, that Denmark's and Norway's greater monetary expansion was pivotal to the break-up, whilst Sweden pursued a more prudent monetary policy. In contrast, the article argues that the disintegration of the union is better understood by the implementation of a unilateral Swedish gold blockade policy, influenced by Swedish economic theorists. Secondly, that Sweden in April 1917 finally solved her problem of continued gold inflows by threatening to withdraw from the union. Quite conversely, it is argued that Swedish the Riksbank had to give up her hard line, because Norwegian Norges Bank throughout 1917 forced through gold shipments to pay for Norway's trade deficit, which resulted in a virtual Gold War between the two countries. The scramble for resources saw cordiality being replaced by distrust, whilst national needs overrode any hope of cooperation.
Acknowledgement
I am grateful to Einar Lie, Lars Fredrik Øksendal, Tobias Straumann, Glen O'Hara, Kristine Bruland, editor Camilla Brautaset and two anonymous referees of this journal for their valuable comments. I would also like to thank the participants of the workshop “Processes of Transnationalisation, Europeanisation and Globalisation: a Workshop on Contemporary International History” held at the Centre franco-norvégien en sciences sociales et humaines in Paris in March 2013, where an early draft of this article was discussed and commented by Olga Medvedeva, Emmanuel Moulon-Druol, Thorstein Borring-Olesen and Hallvard Kvale. The responsibility for the views in the article and any errors is mine.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 In the same manner, Bartel (Citation1974, p. 703) mentions the SCU as ‘the most successful of the pre-World War I monetary unions’.
2 The following section is based on Nielsen (Citation1917), Henriksen, Kærgård, and Sørensen (Citation1994), Henriksen and Kærgård (Citation1995), Flandereau (Citation2000), Talia (Citation2004), Øksendal (Citation2007a, Citation2007b) and Rongved (Citation2012).
3 The Danish data in Bergman et al. (Citation1993) are from the Danish central bank, whereas the Norwegian and Swedish data are from an unpublished worksheet constructed for the book by Bordo and Jonung (Citation1987), see Bergman et al. (Citation1993, pp. 509 and 511).
4 Using this period as baseline has been done to avoid, for example, seasonal fluctuations disturbing the data. More specific, Norway had an abnormally high amount of notes in circulation in July 1914, and using this month as the baseline would have made the Norwegian monetary expansion seem much smaller than by using the preceding year as index. A consequence would, for example, have been that the accumulated Swedish note expansion would seem larger than the Norwegian at the end of 1918. The figure ends halfway into 1916, as the accumulated growth thereafter is of a substantially larger scale. Hence, it would be difficult to visualise the period until the first months of 1916 if the whole war-time development was included.
5 See, for example, the 10th edition in 1914 of the influential Swedish economic journal Ekonomisk Tidskrift (edited by David Davidson), with an article by Knut Wicksell called ‘the Riksbank's gold reserve’. A follow-up article in the same journal the next year was called ‘Economic puzzles. (Once again the Riksbank's gold reserve)’. See Ekonomisk Tidskrift, 1914–1915. Norwegian economist Jæger voiced the same opinion in Norwegian economic journal Statsøkonomisk Tidsskrift in 1914.
6 Norwegian National Archives, Norges Bank's archive, Board of Directors II [henceforth NA/NB/DII] D/L-0642: letter from Moll to Bomhoff, 23 January 1915. See also Talia (Citation2004, p. 190) and Olsen and Hoffmeyer (Citation1968, pp. 16, 31–33).
7 Norwegian National Archives, Norges Bank's archive, Board of Directors I [henceforth NA/NB/DI] Bomhoff's copy book [henceforth B/Bb] L-0001: letter from Bomhoff to Moll, 27 January 1915.
8 NA/NB/DII/D/L-0642: ‘P.M. 1’ and ‘P.M. 2’ both dated 4 February 1916, attached to letter from Moll to Bomhoff, 10 February 1916. See also Östlind (Citation1945).
9 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 29 December 1915.
10 NA/NB/DI/B/Bb/L-0001: letter from Bomhoff to Moll, 4 January 1916.
11 The Swedish gold reserve increased from 103 to 113 million kronor in the period, i.e. by less than 10%. The corresponding Norwegian numbers were from 79 to 133 million kroner, i.e. by more than 68%. The Danish gold reserve grew from 75 to 107 million kroner between August 1914 and the end of November 1915, i.e. 43%. See the Riksbank's weekly reports from ‘Statistiska Meddelanden’ 1914–1916 in Ekonomisk Tidskrift.
12 NA/NB/DII/D/L-0642: ‘P.M. 1’ and ‘P.M. 2’ both dated 4 February 1916, attached to letter from Moll to Bomhoff, 10 February 1916. The memos are without author, but due to David Davidson's great influence on the Riksbank in the period, it seems likely that he wrote at least one of them.
13 NA/NB/DII/D/L-0642: ‘P.M. 1’, 4 February 1916.
14 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 10 February 1916.
15 NA/NB/DI/B/Bb/L-0001: letter from Bomhoff to Moll, 20 January 1917.
16 NA/NB/DI, Kittelsen Archive of headquarter [henceforth E] L-0017: letter from Norges Bank to Ministry of Finance, 31 March 1916. See also Ussing (Citation1926, p. 88) and Olsen and Hoffmeyer (Citation1968, p. 49 ff).
17 NA/NB/DI/E/L0017: ‘Valutaresume pr. 30/11–16’, letter from Norges Bank to the Riksbank, 26 October 1916 and letters from Norges Bank to Nationalbanken, 30 October and 10 November 1916.
18 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 31 December 1916.
19 NA/NB/DI/B/Bb/L-0001: letter from Bomhoff to Moll, 20 January 1917.
20 NA/NB/DII/D/L-0642: letter from Bomhoff to Moll, 30 January 1917.
21 NA/NB/DI/B/Bb/L-0001: letter from Bomhoff to Moll, 20 January 1917.
22 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 22 and 30 January 1917.
23 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 30 January 1917.
24 Rygg was admittedly a former professor of economy, and was later to govern Norges Bank also during its deflation policy in the 1920s, but his presence was hardly due to his theoretical competence.
25 Norwegian National Archives, archive of Ministry of Finance, the Finance Office [henceforth NA/FIN/FO] D/Dc/L-0099: letter from Norwegian legation in Copenhagen to Norwegian Ministry of Foreign Affairs.
26 NA/FIN/FO/D/Dc/L-0099: letter from Norges Bank to Ministry of Finance.
27 NA/NB/DII/D/L-0642: ‘P.M. Rörande den skandinaviska myntkonventionen’ memo of 6 February 1917 by D. Davidson, attached to letter from Moll to Bomhoff, 13 February 1917.
28 Danish National Archives, archive of Nationalbanken's board of directors in Rigsarkivet [henceforth DNA/NR] Supplements to the Protocol of the Board of Directors, 1916–1917: letter from Danish Ministry of Finance to Governor Rubin, 15 March 1917. See also NA/FIN/FO/D/Dc/L-0099: letter from the Norwegian Minister in Stockholm Hagerup to Norwegian Minister of Foreign Affairs Ihlen, 17 April 1917.
29 This section is based on the reports to governments of the Danish and Norwegian delegates. Danish report in DNA/NR, box labelled ‘Bilag til direktionsprotokol 1916–1917’, dated 7 May 1917. Norwegian undated report in NA/NB/DII/D/L-0642.
30 NA/NB/DII/D/L-0642: letter from Bomhoff to Moll, 4 July and from Moll to Bomhoff, 17 July 1917.
31 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 2 July 1917.
32 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 6 July 1917.
33 NA/NB/DII/D/L-0642: letter from Bomhoff to Moll, 10 July 1917.
34 NA/NB/DII/D/L-0642: letter from Bomhoff to Moll, 10 and 21 July 1917.
35 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 17 July 1917.
36 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff, 1 August 1917.
37 See communication between Moll and Bomhoff (and deputy governor Monsen), NA/NB/DII/D/L-0642: 1, 9, 16 and 18 August 1917.
38 NA/NB/DI/B/Bb/L-0001: letter from Bomhoff to Moll: 10 September 1917.
39 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff: 11 September 1917.
40 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff: 11 October 1917.
41 NA/NB/DII/D/L-0642: letter from Bomhoff to Moll: 15 October 1917.
42 NA/NB/DII/D/L-0642: letter from Moll to Bomhoff: 17 October 1917.
43 NA/NB/DII/D/L-0642: letter from Norges Bank to the Riksbank: 20 October 1917. It is worth noticing that, from now on, the sender and recipient of the letters were no longer Moll and Bomhoff – but the two banks.
44 NA/NB/DII/D/L-0642: letter from the Riksbank to Norges Bank: 30 October 1917.
45 NA/NB/DII/D/L-0642: letter from the Riksbank to Norges Bank: 5 November 1917.
46 NA/NB/DII/D/L-0642: letter from Norges Bank to the Riksbank 27 October 27 and 8 November 1917.
47 NA/NB/DII/D/L-0642: letter from the Riksbank to Norges Bank, 12 November 1917.
48 NA/NB/DII/D/L-0642: letter from Norges Bank to the Riksbank, 16 November 1917.
49 NA/NB/DII/D/L-0642: letter from the Riksbank to Norges Bank, 19 November 1917.
50 See correspondence between Norges Bank and the Riksbank of February and March 1918 in NA/NB/DII/D/L-0642.